Web Ad Explosion

Any question whether or not the Web had shaken off the Dot.COM bust has been dispelled by a couple of articles. First, Pricewaterhouse Coopers has done the IAB Internet Advertising Revenue Report for 2003 which summarizes the trends in advertsing revenues on the Internet. Next, Business Week in its November 22, 2004 issue reports on the nature of the Online Ad Surge. Here are some key summaries from the reports:

IAB – Internet advertising for all of 2003 totaled just under $7.3 billion, up nearly 21 percent from the 2002 total of $6.0 billion, and marked the first year-over-year annual increase since 2000.

BW – By advertising on the 3 most popular portals, AOL, MSN, and Yahoo – some 50 million surfers saw Fords ads for its newly launched F-150 truck. Traffic to Fords website surged to 3000 hits/second and sales jumped 6% during the campaign. Now there is so much demand , that a Home Page ad on any one of the three portals sells for $300,000 per 24 hours.

IAB – Advertising methods continue to diversify on the Web. Google-like, keyword search revenue increased significantly from 15% of 2002 revenues to 35% in 2003. Classifieds revenue totaled 17 percent of 2003 revenues, up from 15 percent reported in 2002, while rich media advertising (think Flash, GIF animations, and video) accountedfor 8% in 2003 revenues, up from 5% in 2002. Display advertising (ad banners) accounted for21% of total 2003 revenues, down from the 29% reported in 2002.

BW – Customers are online. More than half of US households have always-on broadband connections or equivalent business connections. The big 3 portals average a combined 50M surfers per day delivering twice as many viewers as the World Series.

IAB – Consumer advertising at 37% leads all spending followed by computer ads at 20%.

BW – Video rocks – broadband connections allows adverisers to put TV like ads online (with some ads like Hondas parts-of-the-car RubeGolberg machine ad achieving cult status). Demand is soaring so portals sell time slots in advance like TV networks.

IAB – Ad revenues in 2003 finally exceed peaks last seen in 4Q 2000.

BW – The popular search engine ads at Google and Yahoo are being supplimented by Google Adsense ads on thousands of 3rd party sites.

IAB – Web ad revenues are concentrated in 10 top Web providers, but that 71% is down from 74%.

BW – The Web is much more agile for data gathering. Companies can follow ads in realtime and make immediate adjustments. Also customer preceding and following clicks can be tracked (it is now robustly done) and again strategies modified accordingly.

And we give the final word to Business Week – Web ad revenues are expected to top $9.3 billion topping 2003s 7.3B with a healthy 25%+ growth rate.

Sounds like the Web is doing very well but as usual only a few major players at the top are prospering. Well the traders on eBay,as well as the Google Adsense users would beg to differ, and the many websites that are Amazon associates also would provide not a few contrarian opinions. However there is one overhang risk – Big Businesses proclivity to cook the books. Why else is the tough Sarbanes Oxley new “truth in reporting and accounting” measure moving inexorably forward – because of the Enrons, Adelphia, Worldcoms, etc, etc. Business duplicity has forced government to insure integrity that supposedly the accounting firms were guaranteeing. But now we have George Bush promising to simplify the tax and business reporting requirements. In sum, as a small website I feel exposed to some degree of risk here.

But the bottomline is Web advertising is sustaining a boom and that can only help the Web API in general and savvy, rich media and/or DHTML smart developers. See our sites sections on Flash, JavaScript, and the Web. Also check the animation and 3D resources at the Finally, there is an excellent review of trends in online advertising here.


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